What are the biggest financial pressures faced by renewable energy companies in Egypt?
WALID SHETA: There are 680m people in Africa and the Middle East who do not have access to electricity. The electrification rates in Africa and the Middle East are 47% and 89%, respectively, with average annual power cuts of 56 days in Africa and 14 days in the Middle East. Therefore, we are working on providing countries in these regions with innovative technological solutions that contribute to providing affordable energy.
Some of the biggest obstacles renewables companies face in Egypt are high investment costs and a complex legal framework. The renewable energy laws established by the Ministry of Investment and International Cooperation (MIIC) used to require that investors provide 85% of the loan value in US dollars. However, following Egypt’s currency flotation, banks are no longer able to fund investors, who in turn find themselves unable to reach financial closure before the deadline set by the ministry. In order to help investors, the government recently reduced the energy purchase tariff from $0.144 per KWh to $0.087 per KWh, and reduced the foreign currency requirement to 75%.
Another step supporting investment in renewables was made when the MIIC reformed the local arbitration committees from being made up solely of the local authority, to being composed of both foreign investors and representatives of the Egyptian Cabinet.
How would you rate the effectiveness of initiatives to rationalise energy consumption?
SHETA: The energy sector has great potential to contribute to Egypt’s economic growth. The government’s strategy is to achieve a balanced energy mix from various sources that are owned by Egypt, rather than relying solely on energy production from hydrocarbons.
Overall, the authorities are shifting towards renewable energy resources and the optimisation of clean energy to curb the electricity load. One of the main initiatives that was adopted by the Ministry of Electricity and Renewable Energy (MERE) was the Unified Electricity Law, which separates the Egyptian Electricity Holding Company from the Egyptian Electricity Transmission Company. This law guarantees transparency for both investors and the government.
Another big initiative was the optimisation of street lighting, which currently wastes around 600 MW of electricity per year. The MERE also formulated a regulation that requires all household appliances to have an Energy Star label; this is a great start in helping consumers regulate their own energy consumption.
What do you see as the public and private sectors’ greatest priorities for reform in electricity transmission and distribution?
SHETA: The government has recognised the importance of supplying energy and electricity for attracting foreign investment. Egypt has achieved energy self-sufficiency in the past few years, but among the major challenges for the time being is boosting the efficiency of the electricity transmission and distribution companies. Currently, this is one of the biggest priorities of the MERE. It can be achieved by converting the control centres from traditional grids to smart grids. The initial step for this huge reform endeavour was launching tenders for three regional control centres and 14 dispatching control centres (DCCs). However, this is only the first phase of the plan.
Another priority set by the ministry is to convert the ring main units from air technology to GIS, in order to enable better monitoring and control. Egypt has recently taken a series of measures to reform the country’s legislative system. This has contributed to achieving the flexibility needed for investors to put more money into sectors such as energy.
We have great confidence in the continued growth rates of the Egyptian economy and support all actions taken to achieve comprehensive economic reforms.
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